These recommendations from OUSD's principals were shared with us at the last board Budget and Finance Committee. I wanted to share some reflections on them with constituents.
1. Avoid state receivership and depleting reserve funds. I agree with the need to avoid state receivership at all costs. For those who do not know, state receivership means that Oakland loses local control of our school district. Officials appointed by the Governor would take over, and they answer to the state, not to folks in Oakland. The elected school board has no authority, and initiatives that are not in the best interest of Oakland students can be implemented with no say for Oakland students and families.
Many of the charter schools that exist in Oakland now were created during the period of state receivership, with no say for Oaklanders about whether that was what they wanted to have happen. Self-determination is an important value that I share with many Oaklanders. Whether or not you think more charter schools is good for Oakland, I hope we can agree that Oaklanders need to be the folks deciding what is good for our students, not officials with no accountability to Oakland families.
I also agree that it's important to avoid dipping into our 2% required reserve, because that is the first step toward receivership. It means that the County Office of Education will get involved in our finances and direct the cuts that need to be made to get us back on track.
2. The board needs to be crystal clear on how we got here. I agree with this recommendation as well. I am about 97% clear about why we are in this situation, but I still believe there are important contributing factors that staff have not articulated, or have not articulated clearly, such as the way that they budget for funds they believe will be available due to staff vacancies. As we learned this year, that does not seem to have lent itself to accurate projections, and it's a risky practice that I would like us to stop. One way to use the funds generated by vacancies is to rebuild our reserves, which is discussed more further down. I also want us to publish a report about why we have a budget crisis and the changes we are going to make to prevent it from happening again.
3. Make personnel changes and invest in human capital to ensure this doesn't happen again. High turnover in OUSD makes this recommendation especially important. The last time we were threatened with state receivership, the state's FCMAT team made a similar recommendation, and steps were taken to do training of staff and build capacity. However, high turnover and the resulting lack of institutional memory have contributed to the current situation of very limited capacity in the Finance Department and too much dependency on one person at the top. We need to be fully staffed, but also providing regular training that will ensure that even with turnover, staff are trained on sound practices.
We also need leadership that is committed to ensuring that the board is clear on the financial decisions being made and the consequences of those decisions. No one on the board has a background in finance (and we all have other full time jobs), and so giving us 70 pages of spreadsheets is not the same thing as calling out the financial decisions that we need to make and the possible consequences of those decisions. For example, this year, the former Superintendent and Senior Business Officer decided not to consolidate teachers after our enrollment turned out to be much lower than was projected. This was announced to the board (we were not asked to make a decision), and there was not information provided about the potential impact of that decision. That cannot happen in the future, and we need staff who are committed to the board clearly understanding the choices they are making and the consequences of those choices.
4. Implementing internal controls to prevent budget shortfalls. At the last board meeting, the board decided to bring in a team from FCMAT (Fiscal Crisis and Management Assistance Team) to do a review of our systems. I suspect their findings will largely be the same as last time (you can see a progress report from last time here), but I think an external review is necessary. As discussed above, we have capacity gaps that are going to make improvements to internal controls slower than I'd like, but I agree that this is the work that will prevent us from putting students and schools through this again. Principals have asked that we do regular progress reporting on improvements to internal controls at board meetings, and I think this is right.
5. Systematic portmortems should occur immediately after financial errors. I think this is important, and it's one thing that I would like us to do right now, but because there are so many vacancies in the Finance Department and so much to do to support the work of the FCMAT team, we have decided to focus all staff energy right now on keeping us out of receivership rather than analyzing how this happened. In general, however, I agree with this recommendation, for the sake of transparency as well as ensuring that we understand root causes and hold people accountable for their actions.
6. Implement a strong reserve policy that articulates the goals and use of the reserve fund. I have thought since I joined the board that our reserve fund is too low. We would ideally have at least two months of payroll on hand at all times, and instead we have about two weeks. That margin is too slim. 85% of OUSD's budget is used for staff salaries, and that is why there is not a lot of adjustments that we can make to the budget without having to lay off any staff. We need to begin to build a larger reserve, so that we have more of a cushion, and can respond to unexpected expenses without impacting students. I agree as well that we need a policy that articulates the goals and uses of the fund, to prevent it from being used as a slush fund that is not used as intended by the board. One way to begin to build a larger reserve fund is to use unused funds that result from staff vacancies to fund the reserve fund.
7. Hire a Superintendent that will prioritize financial sustainability for OUSD. Enough said. It has become so clear to me over the last several months that it is our students (and the staff who work with them) who suffer when we don't pay enough attention to the finances of the district. It is not acceptable for students to suffer as a result of the mistakes of our district's leadership, and I am hoping to hire someone who will take this charge seriously and move quickly to make our systems stronger.